sharing economy definition

Contributor(s): Nicole Laskowski

Sharing economy, also known as collaborative consumption, is a trending business concept that highlights the ability (and perhaps the preference) for individuals to rent or borrow goods rather than buy and own them.

The most important criteria for a sharing economy is that it allows individuals to monetize assets that are not being fully utilized. In the past, people discovered and shared such assets through classified ads in a local newspaper or by word of mouth. With the advent of the Internet, pervasive computing and the ease of mobile payments (m-payments), however, that began to change. 

The growing number of mobile platforms that effectively connect people who have certain goods, services and/or skills with those who don't, is making it possible for ordinary people to advertise and sell goods and services that used to be provided by full-time businesses. Perhaps the most well-known example of the sharing economy is eBay, a site that provides customers with an easy way to become sellers. Ebay is also known for its secure, easy-to-use payment system and mechanisms that allow members to evaluate trust -- two other important criteria for the sharing economy. 

Examples of sustainable startup businesses that have grown out of the sharing economy include Zipcar, a car-sharing service that allows members to rent vehicles by the hour and Airbnb, a peer-to-peer marketplace for lodging. 

See also: Square, PayPal, wikinomics

This was first published in September 2013

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